Question 6

To find details about a specific bond, one would refer to a legal document known as the

a. debenture.

b. trust certificate.

c. financial newspaper.

d. indenture.

4 points

Question 7

A sinking fund is

a. setting aside a portion of the principal each year.

b. money invested poorly.

c. a low-interest investment.

d. a bond that decreases in value until maturity.

4 points

Question 8

Upon maturity of a zero coupon bond, the owner receives

a. the entire interest amount.

b. the principal.

c. the interest earned over its life.

d. nothing; payments for a zero coupon bond are periodic.

4 points

Question 9

A $1,000 par bond with a closing price of 107 in the financial press has a dollar price of

a. $107.00.

b. $1,070.00.

c. $1,700.00.

d. $10,700.

4 points

Question 10

Which is better to own during a period of declining interest rates in terms of reinvestment rate risk?

a. a zero coupon bond

b. a bond with a 13% coupon

c. a bond with a variable interest rate

d. a municipal bond

4 points

Question 11

When receiving a 10% stock dividend, the owner of 427 shares of stock will receive

a. 4.27 shares.

b. 42.7 shares.

c. 43 shares.

d. 42 shares plus cash.